Moody’s put Ba1 Catalunya Banc covered bonds on review for upgrade yesterday (Wednesday), mirroring a rating action on the issuer that reflects the planned acquisition of the bank by BBVA. The cédulas have tightened 20bp-25bp since the announcement of the acquisition, according to an analyst.

Moody’s rates Catalunya Banc B3. On Tuesday it placed the issuer’s rating on review for upgrade following an announcement on 21 July from Spain’s Fund For Orderly Bank Restructuring that it had agreed to sell Catalunya Banc to Banco Bilbao Vizcaya Argentaria (BBVA).

“The review for upgrade indicates the upward pressure on Catalunya Banc’s debt and deposit ratings that could stem from the acquisition by a stronger domestic peer,” said Moody’s.

Moody’s rates Catalunya Banc cédulas hipotecarias and cédulas territoriales at Ba1. The covered bond anchor is the bank’s senior unsecured rating, with Moody’s not providing any uplift because the bank’s debt ratio is below a 5% threshold. The Timely Payment Indicator assigned to the covered bonds is “probable”, and there is limited TPI leeway for the covered bond programmes.

Agustin Martín, head of European credit research and covered bonds at BBVA, said that Catalunya Banc covered bonds have tightened by 20bp-25bp since the announcement of BBVA’s successful bid for the bank. A Catalunya Banc March 2016 cédulas hipotecarias is quoted at 60bp over bid and a June 2017 cédulas hipotecarias at 70bp over on an asset swap basis, according to Martín.

He also noted a positive impact on multi-cédulas in which Catalunya Banc covered bonds have a large share, with spreads having tightened by 15bp-20bp since the announcement of the BBVA acquisition.

Martín said that there had been very little impact on the spreads of BBVA’s covered bonds, which are trading flat to Banco Santander cédulas. He said a BBVA 2016 issue is quoted at 25bp over bid and a 2017 at 28bp over on an asset swap basis.